There are a myriad of options available to small business owners seeking working capital loans to get their business off the ground. A few of these options are SBA 7(a) term loans as well as working capital loans that are not secured. You may also want to look into alternative financing models that could be used to help finance your small-scale business.
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SBA 7(a) term loans
SBA 7(a) (term) loans are available to small business owners who require working capital. These loans are flexible and can be used for numerous purposes. The funds can be used to refinance loans, expand your business or purchase assets.
The SBA guarantees a portion of the loan to make it less likely that lenders default. However, a fee will be payable to guarantee the loan. The fee is typically 3.75% of the loan’s guarantee amount.
The SBA website offers a comprehensive explanation of the SBA 7 (a) loan. They will also have access to the SBA Lender Match tool, which connects applicants to SBA-approved lenders within two days.
As with most loans, interest rates for 7(a) loans will vary in accordance with the amount borrowed and the repayment terms. It could be variable, fixed or tied to the Prime Rate.
You will need to complete an application form to be eligible for an SBA 7(a), loan. A lender will then review your financial situation and review your business plan. After approval, you will sign a loan contract to receive the loan funds.
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Unsecured working capital loans
Whether you are starting out or expanding, an unsecure working capital loan could be an ideal financial decision. It can be used to pay for expansion, equipment, or to improve your building, among other things. The right option will help your business grow.
It can be much easier than you might think to obtain a working capital loan. Contrary to a line-of-credit, you can get an advance with just a single application. You can even pay for your loan with 3 months of bank statements from your business.
Unsecured loans have higher interest rates. This is because the lender is taking on more risk. As such, a business owner should have a high credit score in order to be eligible. Additionally, you must have a plan for repaying the loan in a timely manner.
Unsecured working capital loans are a great way for your business to bridge short-term financial gaps. Using a working capital loan allows you to take advantage of discounted prices on important products and upgrades to your facilities. A working capital loan can help you to keep your business in business during difficult economic times.
Another advantage of an unsecure working capital loan is the fact that you do not have to pledge any of your assets. Most lenders will require the services of a payment processor and a deposit account.
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Small businesses have other financing options
Alternative finance models for small-sized businesses are fast becoming the preferred option for many entrepreneurs. They provide flexible financing options that will give you the money you need to expand your business.
Alternative loans are also less expensive than conventional ones. Banks usually require large down-payments and you may need wait for a while before getting the cash you require.
Other alternatives to business loans include lines of credit, invoice discounting, credit card, and cash advances from merchants. These options can help you quickly get funds.
Business lines of credit work exactly the same way as credit cards but charge interest only on the money that you withdraw. These types of credit can be especially helpful for short-term expenditures.
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Working capital loans are great for everyday expenses such as purchasing inventory or paying employees. However, they’re not the suitable for large-scale business changes.
Be sure to select a lender who has experience in alternative business loans. Also, take into consideration your credit score. Your chances of getting a favorable financing deal are increased if you have a higher credit score.
Peer-to-peer lending is a different finance option for small-sized companies. Peer-to-business lenders offer small businesses loans through many investors, similar to crowdfunding. This option is particularly useful for small-sized businesses that don’t have collateral.